‘Hardest quarter since the 2008 crash’: Investment plans plunge as Liverpool firms fear inflation and fuel costs

Liverpool Chamber chief calls for tax and red tape changes as retail and hospitality under pressure

The proportion of businesses planning to increase investment in their work has fallen to its lowest level since lockdown as bosses fear rising costs, a new survey has shown.

And as one Merseyside firm said Q2 “has been the hardest quarter for us since the financial crash of 2008”, the CEO of Liverpool Chamber of Commerce says the new Prime Minister must cut red tape and the tax burden on business to give firms the confidence to grow.

Just 17% of respondents in the latest British Chambers of Commerce (BCC) Quarterly Economic Survey said they planned to increase investment in plant, machinery or equipment over the next three months, down from 21% in the previous quarter. Some 26% of those polled said they planned to cut back on investment, while the rest of those polled were expecting no change.

Confidence also fell, with 44% of those polled expecting improved turnover in the next 12 months – down on 49% in the first quarter – and 23% expecting turnover to decline. Just 29% reported rising sales in the previous three months, with a similar number seeing falling sales.

Some two thirds of those polled said they were worried about inflation – up from 50% in Q1. The biggest worry as labour costs, particularly among those in engineering and construction, while more firms were also worried about fuel costs following the Iran war.

The hardest hit sectors were retail and hospitality, with just 31% of hospitality firms and 36% of retailers expecting increased turnover.

Paul Cherpeau, chief executive of Liverpool Chamber, said: “The cost of doing business remains high and sales growth is slow, and this is understandably having a negative impact on the confidence and investment intentions of many firms here in the Liverpool City Region.

“Not for the first time, we see retail and hospitality – two crucial sectors in our local economy – bearing the greatest brunt of those headwinds, while we know from our conversations with members in construction and engineering that they are especially feeling the burden of higher labour costs, which in turn is depressing their ability to offer apprenticeships or hire young people.

“Geopolitical uncertainty and punitive policies at home have created an almost instinctive aversion to risk among many business owners, who will need to see a clear path of future growth and fewer barriers to trade before they will consider making investment decisions.

“That’s the task at hand for the government – and the new Prime Minister – moving forward. They must cut red tape, reduce the tax burden, and deliver policies that incentivise, rather than stymie, ambition.”

What Liverpool businesses told the Chamber

More than 4,700 UK firms took part in the national Quarterly Economic Survey. The study gives bosses the chance to leave anonymous comments about how their businesses are doing – here are some of the comments from Liverpool firms

• “The Iran war has had a huge impact on business confidence and our customers are postponing investments that they had planned to make. It has been the hardest quarter for us since the financial crash of 2008.”
• “Despite having good rates of remuneration there is a severe shortage of skilled personnel available making recruitment and long-term expansion difficult. The business has taken on apprentices as a long-term option but will only see the rewards in 2 to 3 years’ time, placing extra financial pressures in the short term. Due to the cost of living crisis, customers’ average spend is down. Increase in Business Rates and increases in NIC’s & wages contributing to additional pressures.”
• “Our current operating environment is becoming increasingly challenging due to rising costs, growing demand for services and increasing expectations from clients. Costs associated with staffing, software licensing, cybersecurity, insurance, utilities and compliance continues to rise year-on-year, placing pressure on operating margins. At the same time, we are committed to delivering value to our clients and have consciously absorbed many of these cost increases rather than passing them directly on. Whilst this approach has helped maintain strong client relationships and supported organisations facing their own financial pressures, particularly within the charity and third sectors, it has resulted in increased pressure on profitability.”
• “We are extremely busy with good long-term orders. We need to invest and grow. High taxation slows down the pace of recruitment and investment. New employment rules mean we are very careful in who we take on.”